Let's Live Nice

Pages

Bank Nice

The Problem with Big Banks and the Benefits of Credit Unions

Most
of us require a system to save, transfer, and borrow money. Banks have
traditionally offered these services, but banks have developed some big
problems that harm us. Credit unions offer a less harmful solution to banking.

What’s a big bank?

Banks are for-profit business
corporations, owned by private investors, and governed by a board of directors
chosen by the stockholders1. The four biggest banks are Bank of
America, JPMorgan Chase, Citigroup, and Wells Fargo. Based on recent data, the “big four” collectively
hold/control:

$7.7 trillion in assets3

34% of bank deposits4

44% of credit card
purchases5

58% of
mortgages6

What’s wrong with big banks? Well, big banks:

Put our Economy at Risk: Large banks
control trillions of dollars and are single points of economic failure. These
large banks are highly interconnected, and one failure can rapidly spread to
other institutions. Large banks also engage in financially risky behavior, and
have accumulated dangerous levels of toxic assets. According to a recent study
from the Federal Reserve Board, the size of our largest banks is the #1 factor influencing
our vulnerability to financial catastrophe7.

Systematically abuse our laws. Manybig banks have been convicted of extensive misconduct in
their banking policies. Bank of America paid $137 million in restitution for
fraud in the municipal bond market8. Citigroup settled for $215
million for their engagement in “systematic and widespread deceptive and abusive lending
practices.”9 JPMorgan Chase settled for
$154 million for misleading its own investors related to complex
mortgage securities10. These punishing
costs amount to only a few weeks worth of profits, but are a tiny fraction of the damages done by these illegal practices.

Harm Individual
Customers: Many big banks harm their customers with excessive and
unfair fees, predatory lending practices, and poor customer service. Bank
of America recently settled a $410 million class action lawsuit for processing “debit card transactions in
order of highest to lowest dollar amount to maximize the number of overdraft
fees assessed to its customers.”11Several Wells Fargo
whistleblowers described company practices that “pushed customers who could have qualified
for prime loans into subprime mortgages,” specifically targeted African
Americans even through their churches because “church leaders had a lot of influence and
could convince congregants to take out subprime loans.”12In
addition to specific incidents such as these, the four big banks are listed as
in the bottom half of organizations in overall customer service for 201113.
Unlike credit unions, banks want to maximize profit. This incentivizes
banks to get as much money out of their customers (that’s you!) as they can get
away with.

Make Violent
Investments:Big banks use some of their enormous profits for unethical purposes,
like investing capital and services in private prison corporations14,
mercenary army corporations15, warlords, and terrorist organizations16. For example, JPMorgan Chase recently settled with the US government for $88 million
dollars for violating Weapons of Mass Destruction Proliferation rules as well
as sanctions against Cuba, Iran, and Sudan17. The big banks are also
the money behind businesses that exploit the working poor, such as the payday
loan industry18.

Undermine
Democracy: Big banks fund lobbying
efforts, give campaign contributions, and place their own executives
in powerful government positions. In turn, this changes the power dynamic in our political process. According to the National Bureau of Economic Research, big banks lobby the
government to loosen regulations and allow riskier behaviors that harm
individual consumers and put the economy at risk19. From 1990 to
2010, the Securities and Investment Sector was the third largest campaign
contributor, and divided their support evenly between Democrats and Republicans20.
Henry Paulson is the poster child of the cycle of banking and government
positions. As a former CEO of Goldman Sachs, he was appointed the US Secretary
of Treasury and architected the bank bailout in 200821.

Disallow
Dialogue: The customer has little power to engage in dialogue with
these companies. In banks this large, an individual person's voice is lost.
If you dislike your bank fees or mortgage practices, how can you tell them that? If you are upset with the programs that they are choosing to sponsor or support, where is
the space to voice your concern? Some brave groups of people have resorted to strikes22
and class action lawsuits23 to make their voices heard, but the best way to change big banks is to move your money to a credit union.

How do you bank nice? Join a Credit Union.

A credit union is a not-for-profit,
cooperative financial institutions that is democratically owned by its members
(that’s you!), and run by a volunteer board elected by the
members2. Credit unions
are membership organizations. People qualify for membership through an employer,
organization association (i.e. churches), or community of residence (i.e. live
in a particular city or town). Credit unions range in size with the largest
being the Navy Federal Credit Union ($41.5 billion in assets, 148 locations
nationwide)24 and the smallest credit unions may have single locations
and less than $10 million in assets25.

What’s so great about credit unions?

Priority shift: People not profit: Credit unions are chartered to help people, not
make a profit. According to the Credit Union National Association,
their goal is to “serve all of our members well, including those of modest
means – every member counts.”26 Credit unions actively educate
members about financial services, rather than prey on their lack of knowledge.
Since credit unions are not driven by profits, they take fewer risks with their
assets.

Lower fees, better savings and services: Credit union earnings are returned
to the members in the form of lower loan rates, higher savings rates27,
and lower fees. Common fees and interest rates were compared across big banks,
small banks, big credit unions, and small credit unions in the table to the left. Credit unions still have costs to cover, but these fees are approved by the members. Since most credit unions are much smaller, there are typically no call centers
and a relationship between the institution and the members can be fostered.

Investing in local community: Credit unions are typically community or
region based. The members who own the credit union are therefore inclined to
invest in their own community. Members can make sure people in their community
get the services they need.

Providing Financial Education: Credit unions provide financial education to their members and their community rather than pushing them to make unsound decisions. Each credit union develop their own programs, but examples providing by the California Credit Union League include hosting seminars and classes about basic financial skills and services and providing programs to help members escape a predatory lending cycle, especially in targeted communities.

Engage in a Democratic Process: As a member of a credit union you vote to elect
board members and have a voice in the direction of the institution. Each member has
one vote, regardless of the amount of money in your accounts. You can also serve on
the volunteer board. Some credit unions hold meetings for their members, providing an opportunity for you to weigh in on issues. This ownership also
conveys responsibility for members to help uphold the values of the credit
union.

But
what about...

Deposit
insurance. Credit unions are federally insured up to $250,000 per
account by the US Government, through National Credit Union Association2, just as the
FDIC insures money in a bank account. You only need to make sure the credit union you join is backed by the NCUA.

Financial
services like loans and credit cards. Most credit unions offer other
personal banking services including home and auto loans, lines of credit, and
credit cards. These services frequently have better ratesthan
banks27.

Convenience. While
some credit union are national, most are small and local. This may have hindered
banking convenience in the past, but many credit unions are members in a large co-op ATM network (no fee ATM
transactions at any credit union or 7-Eleven)28, allow mail in
transactions, and offer free online banking. Many credit unions have 28,000 no fee ATMs in every state, nationwide compared to 18,000 for Bank of America.

Credit
scores. According to FICO, a credit scoring company, opening/closing
a checking/savings account should NOT affect your credit scores. However, if
the credit union officially performs a “hard” credit check before opening an account this could lower your score. After talking to a Patelco branch manager,
he explained that Patelco does a “soft” credit check when opening an account,
which does not affect your credit
score. Opening and closing credit card accounts may impact your credit score, so ask if you are concerned.

Are small or community banks a good alternative?

Small or community banks are privately owned, for-profit
entities with assets ranging from $10 million to $10 billion (or more)29.
They usually have several branches, but are confined to a specific geographic
area. Some community banks invest in the local community and provide better services and relationships with their customers30. However, since they are not cooperatives, the boards of
these banks can change policies, and even sell out to a larger bank without your
voice. Additionally, most small banks' for-profit structure still incentivizes making money
from their customers (you) to benefit shareholders (not you).

Credit
Unions are the best way to bank nice.

Call to Action

Move your money from a bank to a credit
union! Visit CUlookup.com to find a credit union near you.

If you are a member of a credit union, play an
active role advocating for equitable services for your community! Credit unions were founded to service all
members equitably, including those with modest means. Some argue31 that
very large credit unions resemble banks and may be moving away from their
values/mission to ensure access to individuals of modest means and cooperative
structure with active member voices. Since members are owners, we are
responsible for defending the mission of institution, so we must use your voice
and get involved to ensure that the values you switched to a credit union for
are being upheld.

8. “Bank of America Agrees to pay
$137.3 Million in Restitution to Federal and State Agencies as a Condition of
the Justice Department’s Antitrust Corporate Leniency Program,” US Department
of Justice, December 7, 2010, accessed November 5, 2011, http://www.justice.gov/opa/pr/2010/December/10-at-1400.html

19. Deniz Igan, Prachi Mishra, and
Thierry Tressel, “A Fistful of Dollars: Lobbying and the Financial Crisis,” National
Bureau of Economic Research Working Paper, May 2011, accessed on November 5,
2011 http://www.nber.org/papers/w17076

Gold provides appreciably designed a history connected with guy, the economics and also the total conception connected with life to help as being a uncomplicated hunter gatherer to some guy that's influenced from the electrical power connected with capitalism and also understands the worth connected with success and its particular property. Gold any time found practically 45, 000 years back any time Paleolithic guy found an item of steel which often got platinum debris within it. Gold got certainly not made it easier for guy develop equipment connected with the first wants including arrows or spears or even regarding farm...Trucking Insurance

This is very good information.i think it's useful advice...There are many private check printing companies and check printing suppliers these days. They supply quick and secure checks as well.Learn More

Wisconsin Mortgage Corporation has been providing quality home loans across Wisconsin.Meet our loan officers. Please choose the loan officer that you were referred to view their personal page and apply online.Best Wisconsin Mortgage Broker Each loan officer's page includes the following services.